Friday, June 1, 2018

Week-end Wrap - June 2, 2018

�Here�s what businesses did with Trump tax-cut windfall. Hint: they didn�t spend it� [MarketWatch, linked by Naked Capitalism]. �American businesses got a huge tax cut in the first quarter, but they didn�t do much with the extra cash. Most of the dough ended up in their bank accounts�. For the most part, the tax savings fattened up the bottom line. Cash flow rose at a $100 billion annual rate while dividends increased at a scant $3.4 billion pace.�

It is important that progressives be able to explain why Republican tax cuts do not work as intended. They do not lead to increases in corporate investment; rather, they lead to profit-taking, speculative binges, and the creation of asset bubbles which eventually cause a financial crash. The cycle takes from five to seven years, judging from the results of the Republican tax cuts of 1924, 1981, and 2001-2003. In January 2017, we explained the mechanics of the counter-intuitive relationship between tax cuts, financial crashes, and industrial ruin: Why Republican Tax Cuts Always Cause A Financial Crash.

Meet the Economist Behind the One Percent�s Stealth Takeover of America, by Lynn Parramore, May 30, 2018 [Institute for New Economic Thinking, linked by Naked Capitalism].A useful summary by Parramore of Duke University historian Nancy MacLean's book on George Mason University "public choice" economist James McGill Buchanan. After Buchanan died in January 2013, MacLean was the first researcher to gain access to Buchanan's office and archives. She was stunned by what she found:

The archive of the man who had sought to stay under the radar had been left totally unsorted and unguarded. The historian plunged in, and she read through boxes and drawers full of papers that included personal correspondence between Buchanan and billionaire industrialist Charles Koch. That�s when she had an amazing realization: here was the intellectual lynchpin of a stealth revolution currently in progress.

Buchanan was an traditional Virginia bigot. Reacting to the forced desegregation of schools, Buchanan developed an economic philosophy that made "property rights" paramount and condemned any government interference as an assault on liberty. Ever met a right-wing ideologue who insisted that taxation was theft? They were spouting the cooked-down residue of Buchanan's public choice economics.

Particularly important is MacLean's conclusion that Buchanan's economics were grounded in the ideas of John C. Calhoun, the antebellum South Carolina USA Senator who aggressively defended slavery. I have argued that the typical leftist position--that the USA was founded as a conscious attempt to preserve and perpetuate a new white ruling class--is a rejection of the Enlightenment ideals of republicanism. This rejection results in a catastrophic failure to identify and understand the actual agents of the corporatist usurpation of the American experiment in self-government. Summarizing MacLean's conclusion regarding Calhoun and Buchanan, Parramore writes:

Economists Tyler Cowen and Alexander Tabarrok, both of George Mason University, have noted the two men�s affinities, heralding Calhoun �a precursor of modern public choice theory� who �anticipates� Buchanan�s thinking. MacLean observes that both focused on how democracy constrains property owners and aimed for ways to restrict the latitude of voters. She argues out that unlike even the most property-friendly founders Alexander Hamilton and James Madison, Buchanan wanted a private governing elite of corporate power that was wholly released from public accountability.

New government accounting standard can force disclosure of the real cost of tax incentives. By Mya Frazier, May 29, 2018 [Columbia Journalism Review]. As ever more parts and parcels of the public sector are privatized, it is becoming more and more difficult to pry this information out of local and state governments. The story is full of examples of eye-popping tax revenue losses local and state governments have accepted as the price of "attracting" business, such as New York City losing $3 billion in incentives doled out to housing developers.

In 2015, the nonprofit Governmental Accounting Standards Board, which sets financial reporting standards for US state and local governments, issued the rule change in Statement 77. Although voluntary, most governments follow GASB rules because it helps them get higher bond ratings. The new rule requires governments to disclose not only the dollar amount of tax abatements in annual financial reports, but also their purpose, as well as any commitments to build infrastructure assets for companies.

This could be a useful tool we can use in North Carolina.

Republicans in the North Carolina General Assembly rammed through a state budget that was created in secret by just two people: NC House Speaker Tim Moore and NC Senate President Pro Tem Phil Berger. Reports are that Moore and Berger pretty much ignored the proposed budget of NC Governor Roy Cooper. This kind of secretive, authoritarian politics will become more common as the plutocrats consolidate their gains, transforming the United States from a republic into an oligarchy / plutocracy. NC Policy Watch has a number of posts putting before the public the soul-numbing details as they become known:

The 2018 stockholders meeting of JPMorgan Chase was held in Plano, Texas, far from the prying eyes of Wall Street beat reporters. But Wall Street on Parade has a report on the meeting, with a handy recounting of the serial criminal and civil crimes committed by JPMorgan Chase. The 2018 stockholders meeting of Walmart was over in just 24 minutes. Shareholder public interest group Making Change at Walmart wrote:

In just 24 minutes, Walmart effectively silenced the voice of worker frustration and dissent by not addressing pressing worker issues like low and stagnant wages, disrespect and favoritism by management, failure to provide sufficient hours to workers, as well as the need for an independent board member, a call for transparency in worker pay based on ethnicity and race, and the opportunity for Walmart workers to be fairly compensated through Walmart�s share purchase program.

It takes some of us more than 24 minutes to commute to work, but for Walmart�s top 1%, who hold the majority of shares, 24 minutes can silence an entire workforce and suppress over a million hourly workers for another year.�

�When North Dakota Farmers Blew up Partisan Politics� [Z�calo Public Square, linked by Naked Capitalism]. �During the early years of the 20th century, a broad impulse for popular government transformed election law�particularly primaries�in many northern and western states, but North Dakota took it further than some. Rejecting the notion that politics belonged only to professionals, citizens put themselves in the thick of things�replacing the mediating force of a political party with a self-organized polity. Parties, which had formerly controlled candidate selection, remained powerful, but voters could now challenge the establishment players who often used backroom deals and convention shenanigans to stay in power. From the start, the movement backed anyone who supported farm-friendly economic policies, regardless of that candidate�s party affiliation.�

�If the job market is so great, why aren�t many people getting pay raises?� [MarketWatch]. (Lambert at Naked Capitalism: Because it isn�t?) �Research by the Kansas City Federal Reserve found that an abnormally high share of employees still in the same jobs haven�t received a pay raise in the last 12 months despite a 3.9% unemployment rate that is the lowest in almost two decades. Economists refer to the phenomenon as �wage rigidity.� What�s more, the rate of future wage growth in the U.S. also tends to rise more slowly than usual when a high number of people aren�t getting any raises at all, the research suggests. The report might help explain why average U.S. wages still aren�t growing all that fast and it could have implications on how fast the Fed raises interest rates.�

�Last Recession Effect: New Car Buyers Hold Cars Longer� [Federal Reserve Bank of St Louis, linked by Naked Capitalism]. �In 2005, this average age equaled 5.5 years. Beginning with the overall decline in the U.S. economy starting in 2008, the age increased to over 6.8 years by 2012. On average, people who bought new cars were holding their cars longer.�

While some might see the platform as a symbolic gesture, the symbolism alone is significant. The last year of discussion and debate around a basic income has expanded dramatically to include mainstream names in Democratic politics, from California Congressman Ro Khanna to former presidential candidate Hillary Clinton. Now there is potential for new candidates to turn to the party platform as a playbook for solutions to economic justice, and start a conversation about basic income with their constituencies. �I was at a candidate forum yesterday,� said Poindexter, �and I was able to say, �Martin Luther King supported this, Milton Freedman supported this, Bernie Sanders has started to talk about it, AND it is part of the California Democratic Party Platform.��

Malaysia to scrap Kuala Lumpur � Singapore high-speed project, by Keith Barrow, May 28, 2018 [International Rail Journal]. In a sad example of how popularly elected governments can go off course so quickly, the newly-elected prime minister of Malaysia, Mahathir Mohamad announced that his intention to renege on Malaysia's commitment to the construction of a high-speed line linking Kuala Lumpur and Singapore, announced just two months ago. The prime ministers of Malaysia and Singapore had signed an agreement in December 2017 committing both countries to the project. Under the agreement, Malaysia will now have to pay Singapore around Ringgits 500m ($US 126m) to terminate the agreement. Mohamad's move appears to be part of a general budget-cutting drive that will likely result in the imposition of debilitating austerity.

We must reverse the decline in federal spending on scientific research. Eric Fanning, CEO of the Aerospace Industries Association and former Secretary of the Army, had an op-ed in Aviation Week & Space Technology calling for a reversal of the decline in federal spending on scientific research.

As a general rule, the federal government is in a better position to make serious commitments to expand research into promising new technologies when commercial viability hasn�t yet been proven. However, budget issues are putting serious downward pressure on research spending.

Prior to the Budget Control Act of 2011 and its caps on defense and nondefense discretionary spending, the federal share of basic research carried out in the U.S. was 60%. It dropped below 50% after the caps were implemented.

The water war that will decide the fate of 1 in 8 Americans, by Eric Holthaus on May 2, 2018 [Grist]. 1 in 8 Americans depend on the Colorado River as a water supply. The 100-year old series of cooperative regional agreements that govern management of the Colorado's water is beginning to come apart under the pressure of an inadequate snowpack in the Rockies this year. In a bid to grab more water from Arizona, Pueblo, Colorado has walked away from a regional water conservation agreement, and Denver is threatening to follow.

A landmark climate case in the Netherlands, the first to rule that a government has a constitutional duty to protect its citizens from the impacts of climate change, is heading back to court on Monday for a hearing on the Dutch government�s appeal. The Dutch court�s ruling in Urgenda Foundation v. The State of Netherlands in 2015 ordered the government to take more aggressive action to cut carbon emissions.... The lower court�s ruling inspired lawsuits subsequently filed in countries such as Norway, Pakistan, Ireland, Belgium, Colombia, Switzerland and New Zealand. Similar cases also have showed up in the U.S., including two pending cases,Juliana v. United States andClean Air Council v. United States.

Norfolk Southern and New York State on May 24 dedicated the new Genesee Arch Bridgeon NS�s Southern Tier Line (ex-Conrail, ex-Erie), which spans the 235-foot-deep Genesee River Gorge, known as the �Grand Canyon of the East. The new $75 million, 963-foot-long steel arch railroad bridge replaces and iron truss bridge built in 1875 by the Erie Railroad. Railcar weights on the old bridge were restricted to 273,000 pounds�13,000 pounds below the 286K standard�and train speed was restricted to 10 mph. �Trains crossing the new bridge are operating at up to 30 mph with fully loaded cars,� Norfolk Southern pointed out. "New York State contributed $15.5 million for the bridge�s design and construction." [Railway Age]

Here is the latest issue of the online magazine of Herrenknecht AG, the German company that is the world's largest and most experienced designer and builder of large tunnels and tunnel boring machinery. The photographs and videos offer rich visual proof that anyone who accepts the idea of a post-industrial society is an idiot. You want to repair and build infrastructure? You aren't going to do it by hand. The featured project is Norway's 20 kilometer long tunnel for a new double track rail line connecting Oslo with the public transport center of Ski. The tunnel is designed to allow operation of high speed trains at up to 250 kilometers an hour.

On May 23, 2018, the New York City Transit Authority released �Fast Forward: The Plan to Modernize NYCT,� an estimated $19 billion program to upgrade and modernize NYC's bus and subway systems. Goals include extending state-of-the-art signal and track infrastructure to the entire system; making the entire subway system accessible for handicapped riders; 3,650 new subway cars, more than 1,200 refurbished cars, and 4,800 new buses, including 1,600 electric buses, within ten years. NYCT is part of the Metropolitan Transportation Authority, and is the busiest and largest transit system in North America, with daily ridership of 8 million trips (over 2.5 billion annually). The density of NYCT (route miles, and number of stations, per square mile, and per unit of land area), is more than three times that of the next densest transit system, that of Chicago, and proves that "if you build it [dense enough], they will come": more than half of trips in and out of NYC are by NYCT.

Istanbul is graced with two international airports, and a third is under construction. The principal field is Ataturk International Airport (LTBA), which handles primary traffic, both commercial and general aviation. Founded in 1924, it is one of Europe�s oldest commercial airports.